This tutorial is based on using PSP 7 but I will try to explain it in a way that you will understand for any graphics program.

Ok lets get cracking.

The alpha channel - a template defining which part or parts of the over all image are the important ones. (Not the real definition, but for ease of understanding I choose it)

Let me show you what I mean.

1.) In PSP7 load image dragitem26.tga (from your eq\uifiles\default)
2.) From the "Drop down menu" titled Selections click on Load from Alpha channel
3.) You are presented with one choice. (notice the preview of the template, look familiar?) Hit ok.
4.) Now all your graphics have been selected. Shown by a dotted line.

Congrats you are now looking at the Alpha channel laid on top of the image.

For most of you all, this tutorial should have opened you eyes and, no further teaching needs to be said.

Thank you thank you thank you!!! As a test to see if I understood.. I opened up window_pieces03, added a new layer, did the alpha selection like you said, filled it with a cool texture, and then adjusted the opacity... Looks sweet!!

Creating a new Alpha Channel is pretty simple. Select all the "blank" area in your texture using the wand, then Invert the selection to encompass all your graphic elements. Then go to the Selection Menu and choose "Save to Alpha Channel" and continue as above.